(Montel) Nordic power spot prices will likely average below EUR 30/MWh for the remainder of the decade, with a risk of lower prices keeping producers' earnings under pressure, the head of analysis firm Nena Storm Geo said on Thursday.
Nena’s base-case scenario shows spot prices averaging around EUR 27/MWh until 2020 and slightly above EUR 30/MWh by the early 2020s, although prices could languish below EUR 20/MWh in years with above-normal precipitation, said Nena chief executive Christian Sjødin.
The price risk largely depended on level of the region’s hydropower supply, which in 2015 had been very high and drove prices to a 15-year low of EUR 20.98/MWh.
“For the next five years we could see average prices dropping below EUR 20/MWh in wet years,” the CEO told the Pareto energy conference in Oslo, explaining that years with hydropower inflows 20% higher than normal generally occur once a decade.
The latest data showed weekly Nordic reservoirs 7.2 percentage points below the median value for the 1990-2012 period, according to figures at Nord Pool.
In the futures market, the front-year contract was currently trading at EUR 22.40/MWh, compared with around EUR 21/MWh for the 2019 and 2020 contracts – far below Nena’s estimates.
Sjødin said a growing production surplus in the region had depressed prices, while the available export capacity would remain stable until new cables from Norway to Germany and the UK (each with a capacity of 1,400 MW) come online in 2020 and 2021 respectively.
Yet the German cable will have a minimal impact on Nordic prices until the country resolves internal grid bottlenecks, which have prompted TSO Tennet to halt Nordic imports during periods of high wind generation in northern Germany, he said.
“We don’t see a solution to this problem before 2025,” said Sjødin, noting this would strongly limit the upside potential on Nordic power.
Reporting by:
Olav Vilnes
olav@montel.no
14:25, Thursday, 19 January 2017
Editing by:
Jeff Coelho
jeff@montel.no
14:25, Thursday, 19 January 2017